CAS-4 valuation and residuary tariff classification govern captively consumed goods, with unit-specific profit and proper heading selection required.

Captively consumed goods had to be valued on CAS-4 cost of production under Rule 6(b)(ii), with only a unit-specific notional profit and not a notional selling price or group-wide profit; the valuation was therefore remanded for recomputation. For classification, aluminium-foil-backed HLCs and CBOs did not answer the specific description in Heading 7607.30 and fell under the residuary Heading 7607.90. Coated board likewise did not fit Heading 4810.10 and was classifiable under the residuary Heading 4810.90. The valuation issue favoured the assessee, while both classification issues did not.

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Issues: (i) Whether captively consumed goods were to be valued under Rule 6(b)(ii) on the basis of CAS-4 cost of production and not on selling price or group-wide profit; (ii) whether HLCs and CBOs backed with aluminium foil were classifiable under Heading 7607.90 or under Heading 7607.30; (iii) whether coated board was classifiable under Heading 4810.10 or under Heading 4810.90.

Issue (i): Whether captively consumed goods were to be valued under Rule 6(b)(ii) on the basis of CAS-4 cost of production and not on selling price or group-wide profit.

Analysis: The goods were captively consumed and not sold in the market, so valuation had to proceed on the basis of cost of production. The costing method had to conform to CAS-4 and the governing excise valuation principles. The value could not be determined by adopting a notional selling price, and profit, where added, had to be a notional profit relatable to the unit concerned rather than the overall profit of the corporate group.

Conclusion: The valuation was required to be recomputed on the basis of CAS-4 cost of production, with notional profit alone being added in a unit-specific manner. This issue is in favour of the assessee.

Issue (ii): Whether HLCs and CBOs backed with aluminium foil were classifiable under Heading 7607.90 or under Heading 7607.30.

Analysis: Heading 7607.30 covered aluminium foil perforated or cut to shape, while Heading 7607.90 was the residuary entry under Heading 7607. The disputed goods were backed with aluminium foil but were neither perforated nor cut to shape. The specific tariff description therefore did not fit the goods, and the residuary sub-heading applied.

Conclusion: HLCs and CBOs backed with aluminium foil were classifiable under Heading 7607.90. This issue is against the assessee.

Issue (iii): Whether coated board was classifiable under Heading 4810.10 or under Heading 4810.90.

Analysis: Heading 4810.10 covered paper and paperboard of the kind used for writing, printing or other graphic purposes, whereas Heading 4810.90 was the residuary entry. The goods in dispute were coated boards, not plain paperboard, and the specific entry was not wide enough to cover coated board merely because printing was done on it. The residuary classification was therefore appropriate.

Conclusion: Coated board was classifiable under Heading 4810.90. This issue is against the assessee.

Final Conclusion: The appeal was partly successful on valuation, but the classification disputes were decided against the assessee, and the matter was sent back for fresh determination of assessable value in accordance with the correct costing principles.

Ratio Decidendi: Captively consumed goods must be valued on actual cost of production with permissible notional profit, and tariff classification must follow the specific heading only where the goods squarely answer its description, otherwise the residuary entry applies.

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